Why Banks in South Africa Need to Embrace Digital Currencies Before It’s Too Late

Digital currencies like blockchain, CBDCs (Central Bank Digital Currencies), and other technologies are gaining huge attention from central banks worldwide. Many countries are running pilot programs to explore how these new technologies can transform their economies.

However, local banks seem to be slow in adopting them. While governments and regulators are excited, banks are cautious. They might be missing out on major opportunities by holding back, and catching up later could be a tough task. So, why are they hesitating?

The Rise of Central Bank Digital Currencies (CBDCs)

As of today, 44 countries are already testing CBDCs, and around 134 countries—covering almost 98% of the global economy—are looking into digital currencies, according to recent reports. This shows that central banks around the world are serious about the future of money, and digital currencies are likely going to be a part of it.

South Africa is one of those countries that is actively exploring digital currencies. The South African Reserve Bank (SARB) has shared its Digital Payments Roadmap, a plan to push digital payments in the country. As part of Project Stimela, SARB is also studying the potential of a CBDC for general retail use, as a legal tender that would work alongside cash.

Consumer Interest in Digital Payments Is Growing

Consumers in South Africa are already warming up to digital currencies. For instance, many are using cryptocurrencies to buy everyday items. Pick n Pay, a popular supermarket chain, has seen its customers spend more than R1 million every month using crypto, compared to just R25,000 a year ago. This shows that people are ready to embrace digital currencies for retail payments.

Even though governments and consumers are jumping on the digital currency train, local banks are moving slower than expected. Some banks are taking small steps—Absa lets its customers use Luno to buy and sell bitcoin and ether directly from their accounts, and Nedbank supports crypto exchange Ovex while also testing CBDCs with SARB.

But overall, local banks are still cautious about fully adopting digital currencies and blockchain technology. One reason could be the cost and effort involved in upgrading their old systems. Many banks are already heavily invested in their traditional banking systems, and making the switch to blockchain-based solutions may seem like a big, expensive task.

Instead of making a huge shift all at once, banks could take a more gradual approach. They don’t have to completely change their systems overnight. One option is to test a single payment method using digital currency technology. They could run this for six months, see how it works, and then slowly expand it.

This way, banks can dip their toes in without taking on too much risk or cost right away. It could help them better understand the benefits of these new systems while avoiding a major disruption to their operations.

Banks Could Be Missing Big Opportunities

By staying cautious, banks may be missing out on ways to make cross-border payments faster, cheaper, and more accessible. Fintech companies like Wise and Ripple are already using blockchain technology to improve how money is sent across borders, and banks that don’t adopt these innovations could find themselves falling behind.

Digital currency technology could also help banks better serve underbanked populations, such as immigrants or people with limited credit histories. Blockchain-based identity and credit-scoring solutions could help improve financial inclusion, making it easier for banks to assess creditworthiness and offer services to those who need it most.